Dollar Falls After Snow Signals U.S. Won't Try to Strengthen It

[Changenow]

Jan. 11 (Bloomberg) -- The dollar had the biggest drop in two weeks in Asia after Treasury Secretary John Snow suggested the U.S. won't try to strengthen its currency.

Exchange rates are best left to ``market forces,'' Snow told Reuters in a television interview, three days after he said U.S. policy makers ``want to do things to sustain the strength'' of the dollar, which dropped for a third year in 2004. Those comments last week helped the currency to its second-biggest weekly climb ever against the euro.

*skip*

Snow said in a Dec. 3 interview he has ``a deep respect for the way markets perform,'' suggesting he won't accede to European and Asian calls to halt the dollar's decline, which last year weakened by 7.1 percent against the euro and 4.3 percent versus the euro.

``The repetition of `market forces' sounds likes nothing's changed'' in U.S. currency policy, said Robert Rennie, a currency strategist in Sydney at Westpac Banking Corp. ``So the dollar goes down.'' It may fall to $1.3150 per euro today, he said.

*more*


http://quote.bloomberg.com/apps/news?pid=10000006&sid=a9RlHhN3KuHg&refer=home#

[Cha]

1. I don't understand all this currency talk..

but I do understand with the bush goons in charge..it can be nothing but Bad News and Worse!

[Ediacara]

2. Wow

I should have bought gold (and euros) when I had the chance. Seriously.

I guess pretty soon we'll have to break out these:

[PROGRESSIVE1]

4. Soon we will be able to get an egg mcmuffing breakfast with those...

bills you have posted.

[DBoon]

12. It will take a wheelbarrow full of these

and you will have to worry about getting mugged and having your wheelbarrow stolen

[Bouncy Ball]

3. Could someone kindly put this in plain English

for those of us without a degree in Finance?

Thank you!

[bemildred]

5. Down is up, left is right, and free minds in free markets are on the march

Any more questions?

[Bouncy Ball]

7. Um, yes.

Could someone kindly explain that to me in plain English, because what you said made no sense, either.

But thanks, um, anyway.

[The Zanti Regent]

25. Read Paul Krugman's column in the New York Times today.

Krugman is warning about the coming economic collapse due to the Federal debt.

[Ediacara]

6. Imported goods become super expensive

This is on everything from cars to bananas. Your income doesn't rise, but your expenses do. Plus, it becomes more expensive to travel internationally.

[Bouncy Ball]

8. Thank you.

I appreciate that.

[barb162]

13. but it is a lot more serious than just those things. The fall of the

dollar means the fall of the US. There is no country which has a falling currency that is a "strong" country economically. Think England after WW 1 for a falling currency and a weakening country on all levels. To think of a strong country, think of the US in the 1950s when the dollar was super strong.

Don't buy into the argument that a weak dollar will make US goods cheaper to export like it is some good thing. It is true as far as it goes, but what the hell are we exporting. We hardly manufacture anything in this country anymore. When is the last time you saw a "made in USA" label. And look at what you're buying and I bet it says "made in China" and guess who (China)has the strong currency and I bet they will unpeg it soon from ours.

[Ediacara]

16. Yep

The only time a weak local currency is good for exports is if the trade deficit is in your favor, and you live in a controlled economy where people can work for what a rich country would consider peanuts, yet not necessarily be poverty stricken. This hardly ever actually works, the only example I can think of is China, but it's been "tried" in Indonesia, Thailand, etc with terrible results.

[barb162]

18. yeah, I think we are in for a good recession (meaning very bad)

here very very soon. There is no way we can keep doing this with the dollar. The dollar problem is so tied in with our deficit and the damned shrub tax policy. Shrub will in fact sink this country.

[DBoon]

14. But only evil America hating libruls want to travel abroad anyway

Real Americans stay home and bar-b-que for the holidays.

[kysrsoze]

20. Yeah, and they think that will help to balance the trade deficit too

I've got an idea: stop sucking up to China and help/force US companies to build better products, rather than shutting down US manufacturing and outsourcing IT work to India. Most electronics are made in China and everything else is made in Indonesia. There will soon be nothing left.

For all the bashing these fucks did on China in 2001, they now basically let them bring in whatever they want. It's a big problem.

[spotbird]

11. A supposed benefit of a declining dollar

is that our exports are less expensive to foreigners, so we can sell our stuff internationally.

The problem is that mostly China, but generally foreigners, finance our obscene deficit. As the dollar declines any interest benefit to those international lenders is offset by the decline. They may decide that the party is over, they aren't going to pay for our overspending anymore, or worse. It is ironic that the isolationist Bush administration sacrifices our autonomy by taking charity from the rest of the world in the form of loans. There isn't much doubt that if China wants to repo Twain we'll send China a letter telling them how impolite they are.

[TomClash]

21. Dollar up a bit in the last few weeks

. . . which means profit-taking and they expect rates in the US to rise again.

Imports are more expensive, exports cheaper as the dollar declines. That is supposed to improve the current accounts deficit (which means we buy goods and services on credit because we don't exports enough to pay for them). Of course, exporters could just reap the profits by increasing prices and foreigners could decrease profits by not increasing prices and taking the currency loss.

You cannot sustain a current accounts deficit and low interest rates forever because eventually no one will invest in our debt unless they get a comparable rate of return. So that's one reason why interest rates are rising.

[ally_sc]

30. i know there are a lot of economists out there...please reply..

please put in layman's terms...

[Oversea Visitor]

33. A simple example

Lets look at oil.
As US dollars decline in value oil prices will rise in US.
The increase in cost of oil will effect many services and products..
transportation, productions, services.

This increase will drive up the prices. The effect on you is the declining Purchasing Power of your salary. This means that after you pay for what you really need you have less dollars left to spend. This less dollars to spend means that it will create a slow down on income to many other business.

What Snow statement means.... The value of the US dollars is demand driven. When he say he wont defend it means leave it to other. Defending it mean going into the market and buying dollars hence creating a demand.

The likely effect of that statement will be seen as US itself admiting that the dollars is in trouble. Countries will then demand for trade in Euro Dollars. They will start signing contract in Euro Dollars and they will start trading in Euro Dollars. But given the trade deficit as it is US itself cannot correct the suituation. What you sell out create a demand for dollars what you buy wheather in US dollars or other currency has an effect but in this case it simply means you pay out more. So you have an over supply of dollars with very little demand. This call leaving it to market forces.

This country has overspend on military area. It has very little benefits economically both short and longterm. That money could have been put to greater use to help Americans as a whole.

In short US is in a very big hole so deep it cant get out of it on its own.

In simple terms the effects on the US dollars is felt by all wage earners. It has very little effects on Multi National Corporations.
I am seriously confuse by a lot of US decision on its own economy. Some of its net effects seriously errode the wealth of the Americans people both in short and longterm. But this are my opinion and based on what I read and data available to me.

[Name removed]

9. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Been Fishing]

10. If the American dollars is worth less against other currencies,

then companies will have to pay more for those jobs sent overseas. But if there are contracts already signed without exchange rate clauses or paid in US $, then US companies are making money.

That means that American goods/services are less expensive for foreigners. (No wonder the Chinese can buy Union Oil.)

But than means Americans must pay more (in US $) when overseas. So, the wars in Iraq and Afghanistan are costing the US tax payer more.

[barb162]

15. China will probably be buying Exxon next week. (sarcasm but not a

whole lot)

[Stella_Artois]

23. Not impossible

A Chinese company bought the IBM PC business recently.

[NVMojo]

17. gee, will the Chimp be able to stay above this crisis, unscathed??

[barb162]

19. I don't see why not. Whatever else he screws up doesn't

seem to bother his supporters.

[durablend]

29. Don't see why not...

Everything he touches turns to shit but his supporters don't seem to give a damn

[Art_from_Ark]

22. "The dollar is best left to market forces"

means that they're probably shorting the dollar and this is the best way to drive it down quickly

[plasticsundance]

24. Correct me if I'm wrong

Doesn't the lowering of the dollar make it seem like the deficit is having less impact on the US economy? In other words, is this another way for the Bush Administration to hide the affects of the numbers?

In addition, I remember reading somewhere that although the fall of the dollar is supposed to be better for exports, the US companies currently exporting are still trying to make their prices competitive with European companies.

[sweetheart]

26. reserve currency status

The problem is that the dollar is a reserve currency, and as it drops,
it losese its status. This is a long term thing, as though your textbook
economics are correct, the loss of reserve currency status means that
the holders of a tremendous amount of dollar assetts, will begin to
liquidate, which will further undermine the dollar.

You could say india has done well when the rupee was devalued from
14 per dollar to 45 or so today. Yet is following the 3rd world
path to power the way to empower the world's largest economy? Likely no.

America has held reserve currency status for a very long time now, and
with this collapse in value, bush has indeed pulled of a stealth
default, screwing people all over the world who have invested in
the US. One person might default on a credit card, but a nation state
is not so easily forgiven. During our lifetimes, after this bush
default, never again will the US economy or dollar have the influence
it once had.

When people elect an incompetent, expect incompetence.

[Art_from_Ark]

34. Reagan tried this same shell game

that is, weaken the dollar to, ostensibly, sell more exports (particularly to Japan). Basically what that did, though, is inflate the trade deficit, because even at that time there was little that America could sell to Japan (besides airplanes, foods, and some services) that were competitive with Japanese products. Meanwhile, Japan produced a vast array of quality products that Americans continued to buy despite the (sometimes) higher prices

[struggle4progress]

27. kick

[William Bloode]

28. I have been noticing it....

Starting to show up at the checkout line here lately. Seems everything is going up but wages. I also import some goods from Europe and have been getting hammered in exchange rates v.s. a year ago, and i have to pass the expense on. For example things i paid $15 for, now cost $20.

[eek MD]

31. When oh when will we start to pay off our debt?

...and...Why oh why can't we balance our country's checkbook?..*sigh*

[Oversea Visitor]

32. The decline of the US Dollars

is bad news all round. The statement of not defending the US Dollars is very bad news. No other nations central bank would want to fight this battle now. Sadly the days of the US dollars as world currency is over. Doom by this statement. Euro Dollars will take over the role.